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Merkel's bailout fund hits 'stumbling block'

The Local · 22 Jun 2012, 12:21

Published: 22 Jun 2012 12:21 GMT+02:00

German lawmakers are due to ratify both the pact and the bailout fund on June 29, but President Joachim Gauck's decision to delay signing meant the planned timing for the European Stability Mechanism (ESM) bailout fund to enter into force on July 1 would no longer stand.

Many in the German media supported Gauck's decision to give the Constitutional Court up to three weeks to consider a legal challenge put forward by the far-left Linke party.

In doing so, the President had skilfully "avoided an unprecedented constitutional conflict,” the Süddeutsche Zeitung said on Friday.

By buying the court enough time to properly examine the challenge, both Germany's highest institutions could "escape the accusation of destroying the Euro with a rushed decision."

And given what is at stake for Germany, more scrutiny of the the planned ESM permanent bail out fund cannot be a bad thing, said the Münchner Merkur.

After all, Germany will be responsible for 27 percent of contributions to the ESM fund - expected to contribute €21.7 billion in cash and provide guarantees worth a further €168.3 billion.

It is for the ESM "that Germany has got itself up to the neck in financial adventures," the Munich-based paper added.

Daily paper Die Welt also showed sympathy with the President, who it said had taken a "political risk" when called upon to address "the core question of how German democracy and European politics can coexist in peace."

"In the case of the bail out law, Gauck alone has the answer and also the responsibility. Only his signature gives it legal force in Germany."

It is at times like this, said the paper, that Presidents show their "enormous power," which is enough to challenge even the will of the Chancellor.

And the move is indeed a further blow for Chancellor Merkel, whose "room for manoeuvre is getting smaller," said the left-leaning, Hannover-based Neue Presse.

Having - after long negotiations - finally succeeded on securing support from the opposition parties for the fiscal pact on Thursday, Chancellor Merkel was immediately dealt another "stumbling block," wrote the paper.

Chancellor Merkel - and those looking to rescue the euro - had been hoping for a "strong signal from Germany" said mass-circulation daily Bild. Instead, all they got was "a hammering" from the Constitutional Court.

The Local/DPA/jlb

The Local (news@thelocal.de)

Your comments about this article

15:41 June 22, 2012 by Bushdiver
This is something that should have happened a long time ago. The idea of just throwing money away has to be regulated. Merkel hands out money like clowns hand out balloons at a party. If Germany would not be up to their necks in loses should the EU and Euro fail they would probably just let this collapse.
14:01 June 26, 2012 by Leo Strauss
Speed bump on the Autobahn to national insolvency.
12:21 July 5, 2012 by AlexR
"Germany is not bailing out Europe, it is rescuing itself"

The ECB and eurozone governments, as well as bailing out other members states, have quietly been rescuing German banks and, by extension, German savers. Without these emergency operations, the eurozone would have broken up, German banks would have gone bust and the savings of many ordinary Germans might have been wiped out. More likely the German taxpayer would have had been forced to bail out those banks.

So, as the German people distribute blame for the situation in which they find themselves, they should not ignore their own bankers. If those institutions had not made these investments and financed the current account deficits of Germany's neighbours for so many years, their country would not be on the hook for hundreds of billions of euros of bad debts.

Yet this is something German politicians refuse to acknowledge.

22:23 July 9, 2012 by ceterum censeo
Great, there was no man in Germany to stop Hitler but wish President Joachim Gauck is the man to stop Merkel.

The euro crisis is man-made by Merkel and Sarkozy, who intervened into Greek insolvency, likely to help some German and French mismanaged banks out from their liability.

All and any banks willingly help anybody to get indebted too much if the credit liability is by political decision taken to the taxpayers. Prudent and responsible management of public or private funds is not made by agreements of any kind but with the controlled money supply. When the banks bear their credit responsibility, they shut off the money supply in time. This is the only way and one of the fundamental principles of the economy. European Stability Mechanism (ESM) is just the opposite, to break the principle of good management, in fact a radical neocommunist idea.

The Greek debt is 30% over the GDP and such a debt has never been paid anyone else but the inflation. Greece is a sovereign state, which bankers cannot execute by an auction. It can simply stop paying the debt but is wise Greece shall pay its debt to the last cent with 30-year bonds. Along the time, the Inflation will erode the real value of these bonds to the loss of the creditors but their books stay sound, as the bonds are long term receivables. No crisis will be anywhere. You have not even heard about the case in 1987, when Brazil paid its outstanding foreign public debt this way. The inflation of dollar made the real value of these bonds in 2006 to be at 20% of the face original value and Brazil paid them in advance.

Having no new credit available, but old debt "frozen" at least for 30 years in bonds, Greece must and can adjust its economy without any social crisis.

European Stability Mechanism (ESM) and all related measures shall be annulated, the EU governments shall each focus in managing and ruling of their own countries, let the market economy work free and EU shall continue its valuable service as an platform of cooperation between the independent member nations, being in service, but not in charge.

There is no reason to anyone get out of euro, not to expel anyone of it, unless someone starts issuing counterfeit money and destroy its value by inflation.

Euro is just a monetary unit to measure the value of goods and services, as meter is a unit to measure the length and kilogram to measure the weight. We may substitute any of them with new ones, but the things will no be changed.

Merkel and Sarkozy made fatal mistakes and may not have the character to admit and retreat. Thanks Frenchmen, Sarkozy is now out and thanks President Joachim Gauck, Merkel will go.
18:51 July 11, 2012 by Vultch
At Alex R

Germany is indeed rescuing Europe, when banks loan money to countries (buy bonds) the is an agreement that the money will be paid back. If said countries are run by buffoons whose grasp of economics would make a third world dictator blush - being dictated by backhanders/bribes then its up to the countries respective populations to act and vote the clowns out. I find it ridiculous to blame the lenders..they were lending to governments not crack addicts living in Glasgow.
16:09 July 14, 2012 by luckylongshot
The fundamental problem with the ESM is that trying to solve the problem of too much debt with even more debt cannot actually solve the problem. What is needed to fix the problem is debt reduction to the point where the weak economies in Europe can function profitably. With this in mind it seems cleaar that the ESM is just a technique to transfer mountains of bad debt from the banks to the public. My hope is that the President realises this and kills the ESM and this leads to an initiative that can actually help solve the crisis emerging. What is on the table now only benefits the bankers.
22:25 July 30, 2012 by friedenstempel
The Karlsruhe judges will save us.
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